German dairy farmers win producer price war – while SA industry bleeds

The German dairy strike is over after 10 days of withholding milk.
Issue date : 20 June 2008

- Advertisement -

The German dairy strike is over after 10 days of withholding milk. Buyers and major supermarket groups have agreed to increase the prices they pay. German farmers demand at least є0,43/ℓ (R5,16/ℓ) at the farm gate.

The country’s agriculture minister Horst Seehofer, who supported the strike, said, “Now retailers know they can’t mess with dairy farmers.” Locally, our dairy farmers are facing a crisis as buyers have indicated that they will be offering less for milk. Dean Kleynhans, Milk Producers’ Organisation (MPO) chairperson for the Western Cape, warned that this will result in producers leaving the industry, causing huge shortages for 2009.

“Dairy farmers need to look carefully at their herds and remove cows that are only marginally productive. And production will have to go down at current prices,” he said. R etailers are continuing to import UHT milk and this is unfair to the struggling local industry, according to Kleynhans.

- Advertisement -

“The import agents demand immediate payment, whereas local producers have to absorb payment terms of between 60 and 90 days,” he explained. “Local producers are also paying for shelf space, distribution, merchandising and advertising. How can we compete with an importer who has none of these obligations placed on him by the same retailer?” He went on to explain that the MPO use a consumer simulation model linked to production data, which usually gives an accurate picture of the dairy market. But the higher interest rates, fuel and food prices are currently disrupting consumer behaviour. “We need research to better understand what’s going on,” he said – Wouter Kriel

Farmers welcome Coega refinery

Despite their interest in biofuel production, agribusiness and farmers’ unions have welcomed Minerals and Energy minister Buyelwa Sonjica’s announcement during her budget vote speech that her department supports PetroSA’s plan to fast-track and build a R39 billion crude refinery at Coega in the Eastern Cape.

Grain Dr Kobus Laubscher said that the refinery, with a capacity of 400 000 barrels a day, and the associated pipeline will bring relief to inland fuel deliveries, which are currently reliant on road transport. Laubscher explained that while Grain SA had its full weight behind biofuel initiatives, biofuel was not necessarily the only solution to the energy crisis.

He said they welcomed the news of the new project in light of the worldwide shortage of refineries. This view was shared by Dr John Purchase of the Agricultural Business Chamber. “It’s necessary to build this crude oil refinery as our current refinery capacity is limited and our refineries are old,” Dr Purchase said.

He added he believes biofuel alone is not sufficient to meet SA’s energy needs if the country is to reach its targeted growth rate of 75% to 7% per annum. TAU SA’s Bennie van Zyl pointed out, “One can’t only focus on biofuel when the industry’s sustainability is currently being questioned.” Van Zyl said that until government offered incentives for biofuel production, other energy sources would continue to be important in SA. – Sharon Götte

Agriculture needs more government support

Rising food prices have lead finance minister Trevor Manuel to affirm that the agriculture industry needs more government support. At the recent World Economic Forum he said this should, however, not be in the form of subsidies.

Dr John Purchase, CEO of the Agricultural Business Chamber, agrees. He told Farmer’s Weekly that South Africa would never be able to match the farm subsidies in First World countries. “But we can intervene in other ways, such as by providing more support in the form of research and development and helping to increase market access,” he argued. Gerrit van Rensburg, agriculture spokesperson for the Democratic Alliance, believes that trade barriers and tariffs would also significantly enhance local food security.

“The World Trade Organisation allows for this form of protection – I don’t know why government doesn’t make use of this provision,” he said, adding that government would also benefit from tariffs, as they would be paid directly to government and not to the farmers. e added he doesn’t understand why government hasn’t yet done away with all food taxes. “Taking away food tax would be much more effective than providing food coupons,” he pointed out. – Glenneis Erasmus